Air Liquide 2017 full-year financials show new step to improved performance

Air Liquide has reported consolidated revenue in 2017 of €20,349m ($25,200m), an increase of 12.2% compared with 2016. The total includes a full year of Airgas sales. On a comparable basis, group revenue rose 2.9%.

The second half of 2017 was marked by an acceleration in comparable sales growth, particularly in Q4 (4.5%). For the year as a whole, the currency impact was unfavourable (-1.6%). The positive effect of energy softened during the year and contributed only 1.5% in 2017.

Gas & Services revenue for 2017, which reached €19,642m ($24,325m), rose 13.3% compared with 2016, and was up 3.5% on a comparable basis. It reflects sales acceleration in the second half of the year, with comparable revenue growth in the Q4 up 4.4%. Developing economies showed solid growth, with Gas & Services revenue increasing by 8.1% on a comparable basis for 2017 and by 12.4% in Q4.

Large Industries showed growth of 1.7%. Demand remained strong in North America, where activity rebounded in the US in the 4th quarter after a 3rd quarter marked by client production unit shutdowns due to the hurricanes.

In Europe, sales were down due in particular to the cessation of its operations in Ukraine and an unfavourable comparison effect due to the termination of a contract in the Q4 of 2016. At the product level, demand for hydrogen was high in the region, while oxygen volumes were unchanged in 2017.

Asia-Pacific growth was driven primarily by start-ups and ramp-ups of production units located in China. In the Middle East, the Yanbu hydrogen production facility in Saudi Arabia made a significant contribution to growth for the business line in this region. Lastly, the world’s largest oxygen production facility, located in South Africa, started operating end of December 2017.

Electronics, which grew 3.8% in 2017, reported strong growth in the 2nd half (7.3%). For the year as a whole, growth was driven by solid sales of carrier gases and by continuing strong demand for advanced materials, sales of which grew by more than 20%. Growth in Electronics was also strongly supported by Asia, especially the high demand in China leading to the signature of several new contracts. The Q4 saw growth in all product lines and high sales in equipment and installations.

Healthcare, which rose 5.0%, was solid despite pricing pressure remaining high in Europe. Overall, all activities and all regions were up, in particular the developing economies, especially those in Asia and in Latin America. Demand for home healthcare remained high, Specialty ingredient sales were robust and medical equipment sales strong. In addition, the Healthcare business line continued the strategic pursuit of targeted acquisitions, as illustrated by transactions completed in France, Japan, Canada, and Colombia in 2017.

Engineering & Construction revenue, which reached €335m ($415m), declined by 28.1%on a comparable basis versus 2016, the consequence of weak order intake in 2016. Engineering & Construction stabilised in the 4th quarter of 2017, with sales growth reaching 3.0%. Cumulative order intake for 2017, which came to €730m ($904m), improved significantly compared with 2016.

Global Markets & Technologies revenue reached €372m ($461m), an increase of 13.9% on a comparable basis. Growth was primarily driven by the biogas, maritime, and space businesses. In addition, projects in the area of hydrogen energy for mobility are accelerating.

Source: Air Liquide

The group is pursuing its efforts to reinforce competitiveness. Recurring operational efficiency gains in 2017, which reached €323m ($400m), resulted mostly from industrial projects and procurement initiatives. This high level of efficiencies is in line with the target of more than €300m ($372m) on average per year in the NEOS programme. The cost synergies related to Airgas, fully integrated in 2017, are achieved more rapidly than planned. Thus, at year-end 2017, the total cumulative synergies since the acquisition amounted to $215m, vs $175m initially announced in 2016. As a reminder, Air Liquide is aiming to deliver a total of more than $300m of synergies with Airgas by the end of 2019.

Operating income recurring rose on a reported basis by 11.2% to €3,364m ($4,165m).The group’s operating margin at 16.5%, reflects an improvement of 70 basis points versus 2016 adjusted and excluding the energy price impact. Net profit (group share) totalled €2,200m ($2,724m), up 19.3%. Excluding one-off items related to the strategic asset review and excluding the impact of the US tax reform, which have no impact on cash flow, net profit came to €2,029m ($2,512m), an increase of 10,0%. This figure will serve as the reference for assessing the company’s performance in 2018.

Cash flow after change in Working Capital Requirements reached €4,254m ($5,268m), up 15.1% compared with 2016. This high level of cash flow contributed to the nearly €2bn reduction in net debt, which stood at €13,371m ($16,558m) on 31st December, 2017. The debt to equity ratio was lowered to 80% at year-end 2017, compared with 90% at year-end 2016.

The return on capital employed after tax (ROCE) reached 8.2%, an improvement versus 2016. Excluding the impact on 2017 net profit of one-off items and of the US tax reform, which have no impact on cash flow, ROCE reached 7.7%, an improvement over adjusted 2016 ROCE (6.9%). The group’s objective in connection with its NEOS programme is to achieve ROCE above 10% by 2021/2022.

Board members

Air Liquide has also proposed reappointments of the following board members for a four-year term: Benoît Potier, member of the company’s Board of Directors since 2000 and its Chairman and CEO since 2006; Jean-Paul Agon, member of the Board since 2010 and proposed Lead Director; Sin Leng Low, member of the Board since 2014; Annette Winkler, member of the Board since 2014.

Commenting on the 2017 results, Potier, stated,“The year 2017 marks a new step for the group, which successfully integrated Airgas and which has acquired a new scale, with annual sales surpassing €20bn ($25bn). In a more favourable global economic environment, all Gas & Services activities grew in 2017, in particular Industrial Merchant, which accounts for nearly half of our revenue and whose recovery is being confirmed quarter after quarter. On a geographic level, growth was mainly driven by the developing economies, China in particular, the solid level of activity in the Americas, and the Large Industry projects in the Middle East. The group’s operating performance is improving, with high efficiency gains globally and synergies related to Airgas ahead of our forecast that contribute to the increase in the operating margin and to higher net profit. The balance sheet is strong: the high level of cash flow making a significant contribution to lowering debt by nearly €2bn ($2.5bn) in the year.”

”The group can also rely on its investment decisions, particularly in favour of innovation, which reached a total of 2.6bn ($3.3bn) in 2017, as well as on its €2.1bn ($2.6bn) investment backlog to fuel its future growth. Thanks to its new size, efforts to improve competitiveness, and initiatives launched in connection with its strategic programme, the group is well-positioned for future growth and development. Accordingly, assuming a comparable environment, Air Liquide is confident in its ability to deliver net profit growth in 2018, calculated at constant exchange rate and excluding 2017 exceptionals,” Potier concluded.

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